Default User BR wrote:The question is more of the reasonable expected return for the investment versus the loan payoff.
I'm not sure what you mean? The principal that you borrow vs. the principal that you invest remains the same. if you can make more investing than you would in paying the interest, why would you pay off the loan?
You CAN make more investing than just about any interest rate. VTSMX is up over 20% YTD. Does that mean carrying a 15% loan would be a good strategy? Again, it's what a reasonable expected return for investing would be versus the loan. It can be a bit squishy, of course, but that's part of the uncertainty of investing.
Sometimes it's pretty clear. Last year I took a HEL at 1.99% tax-deductible. I could have, had I wanted, put it in my stable-value fund at work earning 2.32% (at the time) tax-deferred. I didn't, but instead invested to plan. Which brings risk, risk that might mean that I'll "lose" money over the term of the loan. But to me, a reasonable expectation was better than the 1.4% or so actual interest rate on the loan. No-brainer to me.
1. You don't, of course, actually lose money on investments until you sell them (or they go to 0). What I'd really lose would be in opportunity cost if stocks dropped, as the money used to service the loan would instead be invested in lower-cost shares.